Cohen v. 222 Liberty Associates (In Re 222 Liberty Associates)

99 B.R. 639, 1989 Bankr. LEXIS 766, 1989 WL 53980
CourtUnited States Bankruptcy Court, E.D. Pennsylvania
DecidedMay 22, 1989
Docket19-11710
StatusPublished
Cited by14 cases

This text of 99 B.R. 639 (Cohen v. 222 Liberty Associates (In Re 222 Liberty Associates)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cohen v. 222 Liberty Associates (In Re 222 Liberty Associates), 99 B.R. 639, 1989 Bankr. LEXIS 766, 1989 WL 53980 (Pa. 1989).

Opinion

OPINION

DAVID A. SCHOLL, Bankruptcy Judge.

Recent developments in the primary of the two above-captioned adversary proceedings, Adversary No. 88-2130, 1 exemplify the confusion that can result when already-difficult concepts regarding rights to a jury trial are introduced into bankruptcy, an area of law replete with its own particular confusion concerning jury trials. We conclude that one of the Debtor-partnership’s two general partners, Donald L. Wolk (hereinafter “Wolk”), in belatedly demanding a jury trial as to only claims asserted by him and the other general partner of the Debtor, Philip J. Banks (hereinafter “Banks”), against each other, has waived his jury-trial right both procedurally and substantively. We also question whether a right to a jury trial exists as to the claims of Banks and Wolk inter se, which may themselves be core and are enmeshed in an equitable core proceeding. Therefore, we reaffirm our intention to try all claims in this proceeding non-jury in this court.

The underlying facts are as follows. Pri- or to the commencement of the Debtor’s bankruptcy case, in July, 1987, the Debtor and First Fidelity Insurance Corp. (hereinafter “First Fidelity”) entered into an agreement (hereinafter “the Agreement”), *641 whereby the Debtor would sell its only asset, an office building located at 110 South 16th Street, Philadelphia, Pennsylvania, to First Fidelity for $9.6 million. ■ Pursuant to the Agreement, First Fidelity was required to place a $250,000.00 purchase deposit in escrow. The Agreement provided for return of the deposit if the Debtor breached the Agreement, and retention of the deposit by the Debtor as liquidated damages if First Fidelity breached the Agreement. The sale never took place, and the parties to the Agreement have ever since disputed who was at fault and to whom the escrow deposit should be paid.

On April 13,1988, prior to the commencement of the Debtor’s bankruptcy case, First Fidelity and Brad Cohen (hereinafter “Cohen”), the principal of First Fidelity (hereinafter Cohen and First Fidelity are referenced as “the Plaintiffs”), commenced an action in equity in the Court of Common Pleas of Philadelphia against the Debtor, Wolk, Banks and one of the escrow agents. The Complaint, as amended, had two counts. The first count sought rescission of the Agreement and return of the $250,-000.00 escrow deposit. The second count sought reimbursement of costs and expenses, including unspecified attorneys’ fees, on the grounds of the alleged misconduct of the Debtor in inducing First Fidelity to enter into the Agreement.

On May 3, 1988, an involuntary petition in bankruptcy was filed against the Debtor, ultimately resulting in the entry of a consensual order for relief on September 8, 1988. Shortly thereafter, on October 11, 1988, the foregoing state court litigation was removed to this court. Upon a motion by Plaintiffs for relief from the automatic stay, we entered an Order on January 25, 1989, granting the relief, but specifically preventing the entry of any requests for monetary relief against the Debtor. This Order was intended to limit the Plaintiffs’ claim to merely a determination of who was entitled to the escrow deposit.

Prior to the removal, on or about May 20, 1988, Banks, through counsel then acting for all the defendants, had filed and served an answer to the Plaintiffs’ Complaint. Contained therein was a denial of the allegations in the Plaintiffs’ Complaint and a Counterclaim seeking recovery of the $250,000.00 escrow deposit by the Debtor. By Order dated January 9,1989, upon separate motions by Wolk and the Plaintiffs in this court, the firm which had been representing the Debtor up to that time, Abraham, Pressman, and Bauer, P.C. (hereinafter “APB”), was disqualified from representing the Debtor any further because of its close association with Banks, and the development of conflicts of interest among Banks, Wolk, and the Debtor. No determination was made at that time as to whether ABP could continue to represent Banks in any capacity, including appearing for him in this adversary proceeding.

On January 25,1989, the date established for trial of this proceeding, we conducted a colloquy including counsel for the Debtor replacing ABP; and counsel for the Official Unsecured Creditors’ Committee (hereinafter “the Committee”), the Plaintiffs, and Wolk. Banks was not represented. At its close, we entered a consensual Pre-Trial Order, detailing dates for exchange of exhibits and witness lists and scheduling the trial of this proceeding on March 8, 1989.

On March 2, 1989, new counsel entered an appearance for Banks. Replacement counsel for the Debtor and new counsel for Banks separately moved to continue the trial date, but these motions were denied. On March 6,1989, Banks’ counsel moved to file an attached lengthy Amended Answer containing Counterclaims against the Plaintiffs and Cross-claims against Wolk.

The principal allegations in Banks’ cross-claims against Wolk were as follows: (1) Wolk committed fraud and misrepresentation against Banks by allegedly concealing the fact that Wolk had an interest in First Fidelity, the purchaser of the Debtor’s property; by allegedly delaying the sale of the property; and by contracting for the property at an unfair price; (2) Wolk and Cohen allegedly engaged in a “civil conspiracy” by concealing the true identity of the purchasers of the property of the Debtor; and (3) Wolk thus breached his fiduciary obligations to Banks as a general partner *642 of the Debtor' and “intentionally interfered” with the performance of the Agreement between the Debtor and First Fidelity-

Counsel for all interested parties appeared on March 8, 1989, and were asked their position as to Banks’ motion to file this new pleading. Counsel for the Debtor and the Committee supported the motion. Wolk’s counsel vigorously opposed it, claiming that allowing it to be filed would significantly delay the trial. The Plaintiffs’ counsel somewhat less vigorously opposed it on the grounds of untimeliness, opening .a disputed dialogue on the issue of whether ABP had been disqualified from representing Banks and whether Banks was dilatory in obtaining substitute counsel. We did not feel that Banks had necessarily been dilatory under the circumstances and, in light of the liberality accorded to allowing amendments to pleadings articulated in Bankruptcy Rule (hereinafter “B.Rule”) 7015 and Federal Rule of Civil Procedure (hereinafter “F.R.Civ.P.”) 15(a), indicated an intention to grant the motion. We then gave the Plaintiffs’ counsel, who was pressing to try the case as soon as possible, the choice of going forward with the trial on that date, without further discovery by any party, or obtaining a continuance. Said counsel opted for a continuance, and requested a 30-day delay. All counsel present ultimately agreed to an amended pre-trial Order which contemplated closing the pleadings by April 7, 1989; completing discovery by May 8, 1989; and trial on June 7, 1989, which was memorialized in our Order of March 9, 1989.

On April 7, 1989, the Plaintiffs filed a motion to dismiss Banks’ counterclaim, contending that it lacked requisite specificity.

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99 B.R. 639, 1989 Bankr. LEXIS 766, 1989 WL 53980, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cohen-v-222-liberty-associates-in-re-222-liberty-associates-paeb-1989.